Merkel’s rejection of May’s proposal on trade talks raises concern

Business leaders south of the Border reacted with cautious optimism to British prime minister Theresa May's decision to single out the UK's special relationship with Ireland in her Brexit trigger letter.

Concern was expressed, however, that German chancellor Angela Merkel quickly rejected Ms May's plan to hold trade talks alongside negotiations around the article 50 secession and that this would lead to the uncertainty during the two years of talks over the terms of Britain's exit from the EU.

"There is some acknowledgement of the particular situation on the island of Ireland and I am happy that that has been recognised by the British," said Gabriel D'Arcy, the chief executive of LacPatrick, the Monaghan-based dairy business that operates two factories in Northern Ireland.

"I hope it is reciprocated on the European side because in the event of an exit from the single market and the customs union, the next best option is a free trade agreement between Britain and Europe on agriculture and food," said Mr D'Arcy. "That would certainty de-risk things, but it is all to play for. The difficulty is food and drink doesn't figure as a sector on the priority list on the British side."

Government to outline Irish priorities before EU position agreed

---

Resigned relief across EU as May launches Brexit

---

May pledges to take constructive approach to Brexit talks

---

Sterling and European shares endure choppy session as Brexit begins

---

Merger

Formed by the merger of co-ops north and south of the Border in 2015, LacPatrick employs 330 staff and buys 600 million litres of milk from 1,100 farmers, including 500 million from farms in Northern Ireland, supporting as many as 5,000 jobs north and south of the Border.

“If a hard Brexit comes and there is no free trade agreement, well then if you are a dairy processor who has most of its processing assets in Northern Ireland and a lot of milk in the Republic of Ireland, that represents a very considerable challenge. You are cutting off your farmers and their milk from their processing,” said Mr D’Arcy.

Martin McVicar, managing director of forklift maker Combilift, another Monaghan firm, said he was concerned about the absence of an EU-UK trade deal at the end of the two-year divorce and the possible imposition of high tariffs. A quarter of the firm's exports are sold into the UK.

“The biggest concern for us is what is going to happen in two years when the UK is out and there is trade deal between the UK and Europe. That is a big, big uncertainty.”

Particular hub

Ireland exported €4.1 billion worth of food and drink products to the UK market in 2016, representing 37 per cent of all Irish exports, with the border region being a particular hub in the agri sector.

In addition, 54 per cent of Irish meat and livestock exports and 90 per cent of horticultural and cereal exports ended up in the UK.

Tara McCarthy, chief executive of Bord Bia, was reassured that Ms May had said that the UK wanted to minimise disruption, but pointed to a risk: that the British leader referred to possible World Trade Organisation tariffs if Britain departed the EU without a trade deal.

“Clearly she has called out that special relationship with Ireland. She is very aware of it and they are not trying to play a UK-only, ‘Make Britain Great Again’ approach,” she said.

“You get comfort from the letter but there is a very stern tone at the back of it too as to what the downside scenarios are,” she added, referring to the warning about the WTO tariffs.